Stretchline Intellectual Properties Ltd vs H & M Hennes & Mauritz UK Ltd, Court of Appeal, UK, 22 May 2015
This decision was a decision of the Court of Appeal, upholding an earlier decision by Mr Justice Sales regarding the extent to which a settlement agreement compromising patent proceedings between two parties pre-empted the parties from raising invalidity arguments in subsequent proceedings.
In July 2009, Stretchline initiated proceedings against H & M alleging that various brassieres H & M was selling through its stores infringed Strechline’s patent GB 2,309,038 and a corresponding US patent which related to providing a penetration barrier which prevented under wires in bras from penetrating the tubes which encase them. A mediation took place in May 2011 and the parties entered into a global settlement agreement settling the dispute between the parties with H & M agreeing to stop selling the disputed brassieres and agreeing to drop their allegations that the patents were invalid.
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However, in mid- 2012 Stretchline became suspicious that H & M were once again selling brassieres incorporating under wire casing components in accordance with the patent. On this occasion, the parties were unable to settle their differences and accordingly in March 2013 Stretchline initiated new proceedings against H & M alleging patent infringement and breach of the settlement agreement.
H & M responded by contending that they were not in breach of the earlier settlement agreement as the brassieres that they were selling did not fall within the scope of Stretchline’s patent and that in any event Stretchline’s UK patent was invalid.
Stretchline sought to apply for an order to strike out the parts of H & M’s defence relating to invalidity on the basis that the earlier global settlement agreement precluded H & M from making such an allegation. This application was heard by Mr Justice Sales in August 2014 who agreed with Stretchline and H & M’s allegations of invalidity were struck out. H & M applied to the Court of Appeal requesting that the Sales J’s decision should be reversed.
In his decision dismissing the appeal, Kitchin LJ, with Briggs LJ and Aikens LJ concurring, reviewed the earlier settlement agreement between the two parties and concluded from the wording of the agreement that the intention behind the agreement was to compromise all issues in dispute between them including the issue the validity of the patent and that as part of the agreement H & M had therefore comprised its right to challenge the validity of the patent either by counterclaim or defence.
The Court’s decision is illustrative of the importance of how settlement agreements should be worded. Presumably, had the agreement been drafted differently the parties could have left open the possibility that if Stretchline brought an action for breach of contract, H & M could avail themselves of a defence alleging that the patent was invalid even if the agreement precluded H & M raising such matters in formal invalidity proceedings. However, as drafted, the Court concluded that H & M had no such defence and that the only matter to be decided in future proceedings was whether H & M’s products did indeed fall within the scope of the patent and hence whether their dealings amounted to a breach of contract.
Read the decision here.
Headnote: Nicholas Fox, Simmons & Simmons
